Level One Bancorp, Inc. reports fourth quarter 2021 net income of $7.1 million, representing $0.85 diluted earnings per common share

FARMINGTON HILLS, Mich., Jan. 28, 2022 (GLOBE NEWSWIRE) — Level One Bancorp, Inc. (“Level One”) (Nasdaq: LEVL) today reported its financial results for the fourth quarter of 2021, which included net income of $7.1 million, or $0.85 diluted earnings per common share. This compares to net income of $8.4 million, or $1.02 diluted earnings per common share, in the fourth quarter of 2020.

Patrick J. Fehring, Chief Executive Officer of Level One, commented, “We closed out 2021 with solid fourth quarter earnings of $7.1 million while generating record net income for 2021 of $32.5 million, a 59.10% increase over 2020 net income. During 2021 we provided over $234.3 million through the SBA Paycheck Protection Program (“PPP”) in lending support of our business clients. Level One Bank continues to benefit from the new relationships formed through the SBA PPP program. Additionally, we increased total loans net of PPP loans by 9.97%, increased deposits by 3.91%, and reduced our non-performing assets by $7.3 million or 38.93% from December 31, 2020. Most importantly, we are proud of the unwavering commitment of our entire Level One Team to our clients and the communities we serve.”

Fourth Quarter 2021 Highlights

  • Total loans decreased 3.89% to $1.65 billion at December 31, 2021, compared to $1.72 billion at September 30, 2021
  • Total loans, excluding a decrease of $71.1 million of PPP loans, increased $4.2 million, or 1.07% annualized, during the fourth quarter of 2021
  • Total assets decreased 1.10% to $2.52 billion at December 31, 2021, compared to $2.54 billion at September 30, 2021
  • Total deposits decreased 1.30% to $2.04 billion at December 31, 2021, compared to $2.07 billion at September 30, 2021
  • Book value per common share increased 1.67% to $28.02 per common share at December 31, 2021, compared to $27.56 per common share at September 30, 2021
  • Tangible book value per common share increased 2.19% to $22.37 per common share at December 31, 2021, compared to $21.89 per common share at September 30, 2021
  • Net income of $7.1 million decreased 25.25% from $9.5 million in the preceding quarter
  • Diluted earnings per common share of $0.85 decreased 26.72% compared to $1.16 in the preceding quarter, and 16.67% compared to $1.02 in the fourth quarter of 2020.
  • Net interest margin, on a fully taxable equivalent (“FTE”) basis, was 3.22%, compared to 3.47% in the preceding quarter and 3.27% in the fourth quarter of 2020
  • Noninterest income decreased $1.3 million to $4.7 million in the fourth quarter of 2021, compared to $6.0 million in the preceding quarter
  • Noninterest expense increased $134 thousand to $16.1 million in the fourth quarter of 2021, compared to $16.0 million in the preceding quarter, and included $609 thousand in merger related expenses
  • Provision for loan loss increased $848 thousand to a $341 thousand recovery of provision in the fourth quarter of 2021, compared to a $1.2 million recovery of provision in the preceding quarter

Net Interest Income and Net Interest Margin

Level One’s net interest income decreased $1.2 million, or 5.87%, to $19.3 million in the fourth quarter of 2021, compared to $20.5 million in the preceding quarter, and increased $205 thousand, or 1.07%, compared to $19.1 million in the fourth quarter of 2020. The decrease in net interest income compared to the preceding quarter was primarily due to a decrease of $1.4 million of interest income on loans as a result of lower average loan balances and fewer PPP loans forgiven. The increase in net interest income year over year was primarily due to an increase of $432 thousand of interest on investment securities due to increased volumes of investment securities and decreases in interest expense on deposits of $1.1 million due to lower interest rates paid as a result of revised internal deposit rates and interest expense on subordinated notes of $241 thousand due to the redemption of $15.0 million in subordinated notes. This was partially offset by a decrease of $1.6 million of interest income on loans.

Level One’s net interest margin, on a FTE basis, was 3.22% in the fourth quarter of 2021, compared to 3.47% in the preceding quarter and 3.27% in the fourth quarter of 2020. The decrease in the net interest margin compared to the preceding quarter was primarily a result of a decrease in average loan yields of 14 basis points to 4.46% in the fourth quarter of 2021 compared to 4.60% in the preceding quarter. The decrease in average loan yields was primarily due to a shift in the loan mix as a result of pay downs on commercial loans with significant increases in residential loan balances and fewer PPP loans forgiven.

Noninterest Income

Level One’s noninterest income decreased $1.3 million, or 21.75%, to $4.7 million in the fourth quarter of 2021, compared to $6.0 million in the preceding quarter, and decreased $3.4 million, or 41.71%, compared to $8.1 million in the fourth quarter of 2020. The decrease in noninterest income compared to the preceding quarter was primarily attributable to a decrease of $1.1 million in mortgage banking activities and a decrease of $220 thousand in other charges and fees. The decrease in the mortgage banking activities income compared to the preceding quarter was primarily due to $2.4 million fewer residential loan originations held for sale and $10.2 million fewer residential loans sold as well as smaller margins on loans sold. The decrease in other charges and fees compared to the preceding quarter was primarily due to no interest rate swap fees and fewer tax credits as a result of legislation enacted in response to the COVID-19 pandemic recognized during the preceding quarter.

The decrease in noninterest income in the fourth quarter of 2021 compared to the same period in 2020 was primarily due to a decrease of $3.7 million in mortgage banking activities. This was partially offset by an increase of $227 thousand in service charges on deposits. The decrease in mortgage banking activities compared to the fourth quarter of 2020 was primarily due to $41.6 million fewer residential loan originations held for sale and $51.2 million fewer residential loans sold. The higher volumes in the fourth quarter of 2020 were primarily as a result of the significant decrease in interest rates during 2020 while interest rates have remained relatively stable in 2021. The increase in service charges on deposits was primarily due to higher transaction volumes and deposit balances.

Noninterest Expense

Level One’s noninterest expense increased $134 thousand, or 0.84%, to $16.1 million in the fourth quarter of 2021, compared to $16.0 million in the preceding quarter, and increased $662 thousand, or 4.28%, compared to $15.5 million in the fourth quarter of 2020. The increase in noninterest expense compared to the preceding quarter was primarily attributable to increases of $738 thousand in other expenses and $431 thousand in professional service fees partially offset by a decrease of $1.0 million in salary and employee benefits. The increase in other expenses compared to the third quarter of 2021 was primarily due to increases of $569 thousand in fraud losses and $123 thousand in provision for unfunded commitments. The increase in professional service fees was primarily due to increases of $185 thousand in other professional fees and $153 thousand in legal fees as a result of the merger, as well as a $105 thousand increase in audit fees. The decrease in salary and employee benefits compared to the preceding quarter was primarily due to decreases of $414 thousand in mortgage commissions and $100 thousand in incentive compensation along with an increase of $342 thousand in deferred loan costs.

The increase in noninterest expense in the fourth quarter of 2021 compared to the same period in 2020 was mainly attributable to increases of $914 thousand in other expenses, $484 thousand in professional service fees, and $199 thousand in marketing expense. These increases were partially offset by decreases of $686 thousand in salary and employee benefits and $148 thousand in FDIC premium expense. The increase in other expenses compared to the fourth quarter of 2020 was primarily due to increases of $573 thousand in fraud losses and $197 thousand in captive insurance reserves. The increase in professional service fees was primarily due to increases of $312 thousand in legal fees and $196 thousand in other professional fees as a result of merger related costs. The increase in marketing expense was primarily due to general marketing and advertising for the bank. The decrease in salary and employee benefits compared to the fourth quarter of 2020 was primarily due to a decrease of $634 thousand in incentive compensation and an increase of $452 thousand in deferred loan costs partially offset by an increase of $444 thousand in salaries expense. The decrease in FDIC premium expense was primarily due to an improvement in our capital ratios and income levels.

The efficiency ratio, which is a measure of operating expenses as a percentage of net interest income and noninterest income, was 67.07% for the fourth quarter of 2021, compared to 60.21% for the preceding quarter and 56.81% in the fourth quarter of 2020.

Income Tax Expense

Level One’s income tax provision was $1.2 million, or 14.30% of pretax income, in the fourth quarter of 2021, as compared to $2.3 million, or 19.49% of pretax income, in the preceding quarter and $1.8 million, or 18.05% of pretax income, in the fourth quarter of 2020.

Loan Portfolio

Total loans were $1.65 billion at December 31, 2021, a decrease of $66.9 million, or 3.89%, from $1.72 billion at September 30, 2021, and down $70.8 million, or 4.11%, from $1.72 billion at December 31, 2020. The decrease in total loans compared to September 30, 2021 was primarily due to $71.1 million of PPP loans forgiven by the SBA during the fourth quarter partially offset by a net increase of $4.2 million, or 1.07% annualized growth, in the remainder of the loan portfolio. The decrease in total loans compared to December 31, 2020, was primarily due to a $213.6 million net decrease in PPP loans (originated and forgiven) which was partially offset by a net increase of $142.9 million in the remainder of the loan portfolio.

Investment Securities

The investment securities portfolio grew $8.1 million, or 2.06%, to $397.6 million at December 31, 2021, from $389.5 million at September 30, 2021, and up $94.9 million, or 31.32%, from $302.7 million at December 31, 2020. The increase in the investment securities portfolio compared to September 30, 2021 was primarily due to the purchase of $20.6 million of investment securities using excess cash balances generated by payoffs of PPP loans, partially offset in part by $12.6 million of sales, calls, or maturity of investment securities, principal pay downs, amortization and accretion, and fair market value adjustments. The increase in investment securities compared to December 31, 2020, was primarily due to the purchase of $135.9 million of securities between the two dates using excess cash balances generated by the payoffs and forgiveness of PPP loans, partially offset by $41.1 million of sales, calls, or maturity of investment securities, principal pay downs, amortization and accretion, and fair market value adjustments.

Deposits

Total deposits were $2.04 billion at December 31, 2021, a decrease of $26.9 million, or 1.30%, from $2.07 billion at September 30, 2021, and up $76.8 million, or 3.91%, from $1.96 billion at December 31, 2020. The decrease in deposits compared to September 30, 2021 was primarily due to runoff related to deposit pricing opportunities. The growth in deposits compared to December 31, 2020 was primarily due to organic deposit growth as a result of increased customer liquidity and new customer growth. Total deposit composition at December 31, 2021 consisted of 50.86% of demand deposit accounts, 28.27% of savings and money market accounts and 20.87% of time deposits.

Borrowings

Total debt outstanding was $208.4 million at December 31, 2021, a decrease of $3.3 million, or 1.58%, from $211.7 million at September 30, 2021, and down $21.9 million, or 9.51%, from $230.3 million at December 31, 2020. The decrease in total borrowings compared to September 30, 2021 was primarily due to a decrease of $3.0 million in FHLB borrowings. The decrease in total borrowings compared to December 31, 2020 was primarily due to a decrease of $6.0 million in FHLB borrowings as well as the redemption of $15.0 million of subordinated notes. The Company would have paid approximately $721 thousand in interest in 2021 on the redeemed subordinated notes.

Asset Quality

Nonaccrual loans were $11.3 million, or 0.68% of total loans, at December 31, 2021, a decrease of $844 thousand from nonaccrual loans of $12.1 million, or 0.71% of total loans, at September 30, 2021, and a decrease of $7.5 million from nonaccrual loans of $18.8 million, or 1.09% of total loans, at December 31, 2020. The decrease in nonaccrual loans compared to December 31, 2020 was primarily due to pay offs of four commercial loan relationships totaling $5.4 million, paydowns on four commercial loan relationships totaling $3.9 million, and one $759 thousand residential loan relationship moving back to accruing. This was partially offset by two commercial loan relationships moving to nonaccrual status totaling $2.6 million.

Nonperforming assets, consisting of nonaccrual loans and other real estate owned, as a percentage of total assets were 0.46% at December 31, 2021, compared to 0.48% at September 30, 2021, and 0.77% at December 31, 2020.

Performing troubled debt restructured loans, which are not reported as nonaccrual loans but rather as part of impaired loans, were $699 thousand at December 31, 2021 compared to $762 thousand at September 30, 2021, and $978 thousand at December 31, 2020. Loans to borrowers who are in financial difficulty and who have been granted concessions that may include interest rate reductions, forbearance agreements, and principal deferral or reduction, are categorized as troubled debt restructured loans. In accordance with bank regulatory guidance, troubled debt restructurings do not include short-term modifications made on a good-faith basis in response to the COVID-19 pandemic to borrowers who were current prior to any relief. As of December 31, 2021, there were no loans that remained on a COVID-related deferral compared to $1.1 million as of September 30, 2021.

Net recoveries in the fourth quarter of 2021 were $35 thousand, or 0.01% of average loans on an annualized basis, compared to $224 thousand of net charge-offs, or 0.05% of average loans on an annualized basis for the preceding quarter and $496 thousand of net charge-offs, or 0.11% of average loans on an annualized basis, in the fourth quarter of 2020.

Level One’s provision for loan losses in the fourth quarter of 2021 was a provision recovery of $341 thousand, compared to provision recovery of $1.2 million in the preceding quarter and provision expense of $1.5 million in the fourth quarter of 2020. The decrease in the provision recovery quarter over quarter was primarily due to an increase of $1.2 million in general reserve expense as a result of a reduction in qualitative factors within the allowance for loan loss model as a result of improved credit quality during the preceding quarter, partially offset by a decrease in net charge-offs of $261 thousand. The decrease in the provision expense in the fourth quarter of 2021 compared to the same period in 2020 was primarily due to a decrease in general reserves of $2.0 million resulting from a decrease in qualitative factors and a decrease of $532 thousand in net charge-offs. This was partially offset by a $445 thousand increase in specific reserves. The Company will continue to evaluate the fluid situation in regard to the COVID-19 pandemic and will take further action to appropriately record additional provision for loan losses or decrease the level of the provision for loan losses should there be any indications of significant changes in the credit quality of our portfolio as a result of the COVID-19 pandemic.

The allowance for loan losses was $21.4 million, or 1.30% of total loans, at December 31, 2021, compared to $21.7 million, or 1.26% of total loans, at September 30, 2021, and $22.3 million, or 1.29% of total loans, at December 31, 2020. Excluding PPP loans of $76.5 million, $147.6 million, and $290.1 million as of these dates, respectively, the allowance for loan losses as a percentage of total loans was 1.36% as of December 31, 2021, compared to 1.38% as of September 30, 2021 and 1.56% as of December 31, 2020 (see section entitled “GAAP Reconciliation of Non-GAAP Financial Measures” for further details). The allowance for loan losses as a percentage of total loans excluding PPP loans decreased compared to December 31, 2020 as a result of a reduction in qualitative factors within the allowance for loan loss model as a result of improved credit quality. As of December 31, 2021, the allowance for loan losses as a percentage of nonaccrual loans was 189.79%, compared to 179.11% at September 30, 2021, and 118.50% at December 31, 2020.

Capital

Total shareholders’ equity was $240.1 million at December 31, 2021, an increase of $6.2 million, or 2.63%, compared with $233.9 million at September 30, 2021, and increased $24.8 million, or 11.50%, from $215.3 million at December 31, 2020. The increase in shareholders’ equity quarter over quarter and year over year was primarily as a result of an increase in retained earnings.

Recent Developments

Fourth Quarter Common Stock Dividend: On December 15, 2021, Level One’s Board of Directors declared a quarterly cash dividend of $0.06 per share. This dividend was paid on January 15, 2022, to stockholders of record at the close of business on December 31, 2021.

First Quarter Preferred Stock Dividend: On January 19, 2022, Level One’s Board of Directors declared a quarterly cash dividend of $46.88 per share on its 7.50% Non-Cumulative Perpetual Preferred Stock, Series B. Holders of depositary shares will receive $0.4688 per depositary share. The dividend is payable on February 15, 2022, to shareholders of record at the close of business on January 31, 2022.

About Level One Bancorp, Inc.

Level One Bancorp, Inc. is the holding company for Level One Bank, a full-service commercial and consumer bank headquartered in Michigan with assets of approximately $2.52 billion as of December 31, 2021. It operates sixteen banking centers throughout Metro Detroit, Ann Arbor, Grand Rapids, and Jackson and provides a variety of commercial, small business, and consumer banking services. Level One Bank’s success has been recognized both locally and nationally as the U.S. Small Business Administration’s (SBA) “Community Lender of the Year,” one of American Banker Magazine’s “Top 200 Community Banks in the Nation,” one of Metro Detroit’s “Best & Brightest Companies to Work For” and more. Level One Bank’s business banking division provides a broad spectrum of products including lines of credit, term loans, leases, commercial mortgages, SBA loans, MEDC loans, export-import financing, and a full suite of treasury management services. The consumer banking division offers a range of personal checking, savings and CD products and a complete array of consumer loan products including residential mortgages, new construction and renovation loans, home equity lines of credit, auto loans, and credit card services. Level One Bank offers a variety of digital banking services including online banking, robust mobile banking apps, online account opening and online loan applications for individuals and businesses. Level One Bank offers the sophistication of a big bank, the heart of a community bank, and the spirit of an entrepreneur. For more information, visit www.levelonebank.com.

Forward-Looking Statements

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect management’s current views of future events and operations. These forward-looking statements are based on the information currently available to the Company as of the date of this release. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “will,” “propose,” “may,” “plan,” “seek,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue,” “annualized” or similar terminology. It is important to note that these forward-looking statements are not guarantees of future performance and involve risk and uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, including its effects on the economic environment, our customers and our operations, as well as any changes to federal, state or local government laws, regulations or orders in connection with the pandemic, the ability of the Company to implement its strategy and expand its lending operations, changes in interest rates and other general economic, business and political conditions, including changes in the financial markets, changes in benchmark interest rates used to price loans and deposits in connection with the transition from LIBOR, and changes in tax laws, regulations and guidance, as well as other risks described in the Company’s filings with the Securities and Exchange Commission. The Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

Summary Consolidated Financial Information                  
(Unaudited) As of or for the three months ended,
  December 31,   September 30,   June 30,   March 31,   December 31,
(Dollars in thousands, except per share data)   2021       2021       2021       2021       2020  
Earnings Summary                  
Interest income $ 21,040     $ 22,322     $ 21,737     $ 21,551     $ 22,181  
Interest expense   1,729       1,807       2,121       2,394       3,075  
Net interest income   19,311       20,515       19,616       19,157       19,106  
Provision expense (recovery) for loan losses   (341 )     (1,189 )     540       265       1,538  
Noninterest income   4,727       6,041       4,326       7,278       8,110  
Noninterest expense   16,123       15,989       14,588       15,139       15,461  
Income before income taxes   8,256       11,756       8,814       11,031       10,217  
Income tax provision   1,181       2,291       1,835       2,072       1,844  
Net income $ 7,075     $ 9,465     $ 6,979     $ 8,959     $ 8,373  
Preferred stock dividends   469       468       469       469       479  
Net income available to common shareholders   6,606       8,997       6,510       8,490       7,894  
Net income allocated to participating securities   100       138       92       111       65  
Net income attributable to common shareholders $ 6,506     $ 8,859     $ 6,418     $ 8,379     $ 7,829  
Per Share Data                  
Basic earnings per common share $ 0.86     $ 1.19     $ 0.85     $ 1.11     $ 1.02  
Diluted earnings per common share   0.85       1.16       0.84       1.10       1.02  
Book value per common share   28.02       27.56       26.48       25.40       25.14  
Tangible book value per common share (1)   22.37       21.89       20.84       19.78       19.63  
Preferred shares outstanding (in thousands)   10       10       10       10       10  
Common shares outstanding (in thousands)   7,734       7,640       7,629       7,630       7,634  
Average basic common shares (in thousands)   7,565       7,519       7,520       7,528       7,642  
Average diluted common shares (in thousands)   7,706       7,638       7,633       7,612       7,695  
Selected Period End Balances                  
Total assets $ 2,515,869     $ 2,543,883     $ 2,506,523     $ 2,572,726     $ 2,442,982  
Securities available-for-sale   397,551       389,528       376,453       346,266       302,732  
Total loans   1,652,771       1,719,717       1,775,243       1,861,691       1,723,537  
Total deposits   2,040,082       2,066,992       2,031,808       2,093,965       1,963,312  
Total liabilities   2,275,778       2,309,949       2,281,114       2,355,539       2,227,655  
Total shareholders’ equity   240,091       233,934       225,409       217,187       215,327  
Total common shareholders’ equity   216,719       210,562       202,037       193,815       191,955  
Tangible common shareholders’ equity (1)   173,033       167,262       159,022       150,887       149,844  
Performance and Capital Ratios                  
Return on average assets (annualized)   1.11 %     1.50 %     1.09 %     1.44 %     1.35 %
Return on average equity (annualized)   11.92       16.32       12.52       16.31       15.61  
Net interest margin (fully taxable equivalent)(2)   3.22       3.47       3.30       3.33       3.27  
Efficiency ratio (noninterest expense/net interest income plus noninterest income)   67.07       60.21       60.93       57.27       56.81  
Dividend payout ratio   6.96       5.08       7.02       4.50       4.90  
Total shareholders’ equity to total assets   9.54       9.20       8.99       8.44       8.81  
Tangible common equity to tangible assets (1)   7.00       6.69       6.46       5.96       6.24  
Common equity tier 1 to risk-weighted assets   10.37       9.82       9.66       9.63       9.30  
Tier 1 capital to risk-weighted assets   11.75       11.19       11.09       11.11       10.80  
Total capital to risk-weighted assets   14.76       14.19       14.15       15.18       14.91  
Tier 1 capital to average assets (leverage ratio)   7.93       7.68       7.24       7.15       6.93  
Asset Quality Ratios:                  
Net charge-offs (recoveries) to average loans   (0.01 )%     0.05 %     (0.01 )%     %     0.11 %
Nonperforming assets as a percentage of total assets   0.46       0.48       0.55       0.60       0.77  
Nonaccrual loans as a percent of total loans   0.68       0.71       0.77       0.83       1.09  
Allowance for loan losses as a percentage of total loans   1.30       1.26       1.30       1.21       1.29  
Allowance for loan losses as a percentage of nonaccrual loans   189.79       179.11       168.64       146.95       118.50  
Allowance for loan losses as a percentage of nonaccrual loans, excluding allowance allocated to loans accounted for under ASC 310-30   184.58       173.58       163.76       142.62       114.95  

(1) See section entitled “GAAP Reconciliation of Non-GAAP Financial Measures” below.
(2) Presented on a tax equivalent basis using a 21% tax rate.

Consolidated Balance Sheets          
  As of
  December 31,   September 30,   December 31,
(Dollars in thousands)   2021       2021       2020  
Assets (Unaudited)   (Unaudited)    
Cash and cash equivalents $ 330,146     $ 293,824     $ 264,071  
Securities available-for-sale   397,551       389,528       302,732  
Other investments   14,398       14,398       14,398  
Mortgage loans held for sale, at fair value   12,902       15,351       43,482  
Loans:          
Originated loans   1,486,969       1,537,145       1,498,458  
Acquired loans   165,802       182,572       225,079  
Total loans   1,652,771       1,719,717       1,723,537  
Less: Allowance for loan losses   (21,425 )     (21,731 )     (22,297 )
Net loans   1,631,346       1,697,986       1,701,240  
Premises and equipment, net   14,903       15,170       15,834  
Goodwill   35,554       35,554       35,554  
Mortgage servicing rights, net   5,604       5,051       3,361  
Other intangible assets, net   2,528       2,695       3,196  
Other real estate owned   201              
Bank-owned life insurance   29,960       29,774       18,200  
Income tax benefit   4,829       4,041       3,686  
Interest receivable and other assets   35,947       40,511       37,228  
Total assets $ 2,515,869     $ 2,543,883     $ 2,442,982  
Liabilities          
Deposits:          
Noninterest-bearing demand deposits $ 796,782     $ 791,879     $ 618,677  
Interest-bearing demand deposits   240,781       179,814       127,920  
Money market and savings deposits   576,718       631,551       619,900  
Time deposits   425,801       463,748       596,815  
Total deposits   2,040,082       2,066,992       1,963,312  
Borrowings   178,682       182,058       185,684  
Subordinated notes   29,694       29,668       44,592  
Other liabilities   27,320       31,231       34,067  
Total liabilities   2,275,778       2,309,949       2,227,655  
Shareholders’ equity          
Preferred stock, no par value per share; authorized-50,000 shares; issued and outstanding – 10,000 shares, with a liquidation preference of $2,500 per share, at December 31, 2021, September 30, 2021 and December 31, 2020   23,372       23,372       23,372  
Common stock, no par value per share; authorized – 20,000,000 shares; issued and outstanding – 7,733,726 shares at December 31, 2021, 7,639,544 shares at September 30, 2021 and 7,633,780 shares at December 31, 2020   88,851       86,926       87,615  
Retained earnings   124,923       118,781       96,158  
Accumulated other comprehensive income, net of tax   2,945       4,855       8,182  
Total shareholders’ equity   240,091       233,934       215,327  
Total liabilities and shareholders’ equity $ 2,515,869     $ 2,543,883     $ 2,442,982  
                       
Consolidated Statements of Income                  
  Three months ended   Twelve months ended
  December 31,   September 30,   December 31,   December 31,   December 31,
(In thousands, except per share data)   2021       2021       2020     2021       2020
Interest income (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Originated loans, including fees $ 16,770     $ 17,796     $ 17,439   $ 68,555     $ 62,069
Acquired loans, including fees   2,277       2,651       3,234     10,809       14,421
Securities:                  
Taxable   1,141       1,054       747     4,036       2,677
Tax-exempt   630       630       592     2,510       2,486
Federal funds sold and other   222       191       169     740       986
Total interest income   21,040       22,322       22,181     86,650       82,639
Interest Expense                  
Deposits   870       965       1,954     4,313       10,993
Borrowed funds   466       468       487     1,875       2,353
Subordinated notes   393       374       634     1,863       2,537
Total interest expense   1,729       1,807       3,075     8,051       15,883
Net interest income   19,311       20,515       19,106     78,599       66,756
Provision expense (recovery) for loan losses   (341 )     (1,189 )     1,538     (725 )     11,872
Net interest income after provision for loan losses   19,652       21,704       17,568     79,324       54,884
Noninterest income                  
Service charges on deposits   875       859       648     3,311       2,446
Net gain on sales of securities   1                 21       1,862
Mortgage banking activities   3,105       4,216       6,810     15,843       22,190
Other charges and fees   746       966       652     3,197       3,216
Total noninterest income   4,727       6,041       8,110     22,372       29,714
Noninterest expense                  
Salary and employee benefits   9,528       10,551       10,214     39,353       38,304
Occupancy and equipment expense   1,660       1,680       1,776     6,631       6,549
Professional service fees   1,278       847       794     3,542       2,935
Acquisition and due diligence fees                         1,654
FDIC premium expense   249       244       397     1,027       1,119
Marketing expense   446       428       247     1,288       956
Loan processing expense   228       231       245     983       935
Data processing expense   916       928       859     4,125       3,460
Core deposit premium amortization   167       167       192     668       768
Other expense   1,651       913       737     4,222       3,552
Total noninterest expense   16,123       15,989       15,461     61,839       60,232
Income before income taxes   8,256       11,756       10,217     39,857       24,366
Income tax provision   1,181       2,291       1,844     7,379       3,953
Net income   7,075       9,465       8,373     32,478       20,413
Preferred stock dividends   469       468       479     1,875       479
Net income attributable to common shareholders $ 6,606     $ 8,997     $ 7,894   $ 30,603     $ 19,934
Earnings per common share:                  
Basic earnings per common share $ 0.86     $ 1.19     $ 1.02   $ 4.00     $ 2.58
Diluted earnings per common share $ 0.85     $ 1.16     $ 1.02   $ 3.95     $ 2.57
Cash dividends declared per common share $ 0.06     $ 0.06     $ 0.05   $ 0.24     $ 0.20
Weighted average common shares outstanding—basic   7,565       7,519       7,642     7,536       7,627
Weighted average common shares outstanding—diluted   7,706       7,638       7,695     7,650       7,686
Net Interest Income and Net Interest Margin            
(Unaudited) For the three months ended   For the twelve months ended
  December 31,   September 30,   December 31,   December 31,   December 31,
(Dollars in thousands)   2021       2021       2020       2021       2020  
Average Balance Sheets:                  
Gross loans(1) $ 1,696,073     $ 1,763,214     $ 1,832,912     $ 1,791,671     $ 1,730,470  
Investment securities: (2)                  
Taxable   289,146       265,885       182,522       254,913       138,837  
Tax-exempt   104,945       104,063       92,792       103,609       96,020  
Interest earning cash balances   297,926       221,261       213,502       218,931       194,545  
Other investments   14,398       14,398       14,398       14,398       12,903  
Total interest-earning assets $ 2,402,488     $ 2,368,821     $ 2,336,126     $ 2,383,522     $ 2,172,775  
Non-earning assets   146,046       151,077       138,989       145,990       135,229  
Total assets $ 2,548,534     $ 2,519,898     $ 2,475,115     $ 2,529,512     $ 2,308,004  
                   
Interest-bearing demand deposits   215,685       156,977       123,201       162,405       115,249  
Money market and savings deposits   586,464       624,190       611,162       613,883       496,827  
Time deposits   455,439       489,261       601,900       519,447       573,823  
Borrowings   182,080       181,911       187,399       183,503       279,949  
Subordinated notes   29,677       29,657       44,569       36,376       44,490  
Total interest-bearing liabilities $ 1,469,345     $ 1,481,996     $ 1,568,231     $ 1,515,614     $ 1,510,338  
Noninterest bearing demand deposits   811,394       774,926       659,333       754,376       574,537  
Other liabilities   30,404       31,012       32,990       31,466       30,787  
Shareholders’ equity   237,391       231,964       214,561       228,056       192,342  
Total liabilities and shareholders’ equity $ 2,548,534     $ 2,519,898     $ 2,475,115     $ 2,529,512     $ 2,308,004  
                   
Yields: (3)                  
Earning Assets                  
Gross loans   4.46 %     4.60 %     4.49 %     4.43 %     4.42 %
Investment securities:                  
Taxable   1.57 %     1.57 %     1.63 %     1.58 %     1.93 %
Tax-exempt   2.97 %     2.99 %     3.14 %     3.02 %     3.19 %
Interest earning cash balances   0.15 %     0.15 %     0.11 %     0.13 %     0.24 %
Other investments   3.00 %     2.95 %     2.98 %     3.13 %     4.07 %
Total interest earning assets   3.50 %     3.76 %     3.80 %     3.66 %     3.83 %
                   
Interest-bearing liabilities                  
Interest-bearing demand deposits   0.14 %     0.14 %     0.19 %     0.14 %     0.28 %
Money market and savings deposits   0.16 %     0.17 %     0.35 %     0.19 %     0.56 %
Time deposits   0.49 %     0.53 %     0.89 %     0.56 %     1.38 %
Borrowings   1.02 %     1.02 %     1.03 %     1.02 %     0.84 %
Subordinated notes   5.25 %     5.00 %     5.66 %     5.12 %     5.70 %
Total interest-bearing liabilities   0.47 %     0.48 %     0.78 %     0.53 %     1.05 %
                   
Interest Spread   3.03 %     3.28 %     3.02 %     3.13 %     2.78 %
Net interest margin(4)   3.19 %     3.44 %     3.25 %     3.30 %     3.07 %
Tax equivalent effect   0.03 %     0.03 %     0.02 %     0.03 %     0.03 %
Net interest margin on a fully tax equivalent basis   3.22 %     3.47 %     3.27 %     3.33 %     3.10 %
                                       

(1) Includes nonaccrual loans.
(2) For presentation in this table, average balances and the corresponding average rates for investment securities are based upon historical cost, adjusted for amortization of premiums and accretion of discounts.
(3) Average rates and yields are presented on an annual basis and includes a taxable equivalent adjustment to interest income of $156 thousand, $155 thousand, and $140 thousand on tax-exempt securities for the three months ended December 31, 2021, September 30, 2021, and December 31, 2020, respectively, and $617 thousand and $574 thousand for the twelve months ended December 31, 2021 and 2020, respectively, using a federal income tax rate of 21%.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.

Loan Composition                  
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
(Dollars in thousands)   2021     2021     2021     2021     2020
Commercial real estate: (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Non-owner occupied $ 467,364   $ 479,633   $ 477,715   $ 449,690   $ 445,810
Owner-occupied   283,400     295,228     301,615     300,175     275,022
Total commercial real estate   750,764     774,861     779,330     749,865     720,832
Commercial and industrial   460,530     540,546     642,606     794,096     685,504
Residential real estate   440,640     403,517     352,513     316,089     315,476
Consumer   837     793     794     1,641     1,725
Total loans $ 1,652,771   $ 1,719,717   $ 1,775,243   $ 1,861,691   $ 1,723,537
                             
Impaired Assets                  
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
(Dollars in thousands)   2021     2021     2021     2021     2020
Nonaccrual loans (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Commercial real estate $ 4,246   $ 3,768   $ 4,536   $ 4,542   $ 7,320
Commercial and industrial   4,208     4,746     5,247     6,822     7,490
Residential real estate   2,819     3,610     3,931     3,987     3,991
Consumer   16     9     10     13     15
Total nonaccrual loans   11,289     12,133     13,724     15,364     18,816
Other real estate owned   201                
Total nonperforming assets   11,490     12,133     13,724     15,364     18,816
Performing troubled debt restructurings                  
Commercial and industrial   334     336     336     335     546
Residential real estate   365     426     429     430     432
Total performing troubled debt restructurings   699     762     765     765     978
Total impaired assets $ 12,189   $ 12,895   $ 14,489   $ 16,129   $ 19,794
                   
Loans 90 days or more past due and still accruing $ 162   $ 162   $ 387   $ 328   $ 269

GAAP Reconciliation of Non-GAAP Financial Measures

Some of the financial measures included in this report are not measures of financial condition or performance recognized by GAAP. These non-GAAP financial measures include tangible common shareholders’ equity, tangible book value per common share, the ratio of tangible common equity to tangible assets, and allowance for loan loss as a percentage of total loans, excluding PPP loans. Our management uses these non-GAAP financial measures in its analysis of our performance, and we believe that providing this information to financial analysts and investors allows them to evaluate capital adequacy, as well as better understand and evaluate the Company’s core financial results for the periods in question.

The following presents these non-GAAP financial measures along with their most directly comparable financial measure calculated in accordance with GAAP:

Tangible Common Shareholders’ Equity, Tangible Common Equity to Tangible Assets Ratio and Tangible Book Value Per Common Share
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
(Dollars in thousands, except per share data)   2021       2021       2021       2021       2020  
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Total shareholders’ equity $ 240,091     $ 233,934     $ 225,409     $ 217,187     $ 215,327  
Less:                  
Preferred stock   23,372       23,372       23,372       23,372       23,372  
Total common shareholders’ equity   216,719       210,562       202,037       193,815       191,955  
Less:                  
Goodwill   35,554       35,554       35,554       35,554       35,554  
Mortgage servicing rights, net   5,604       5,051       4,599       4,346       3,361  
Other intangible assets, net   2,528       2,695       2,862       3,028       3,196  
Tangible common shareholders’ equity $ 173,033     $ 167,262     $ 159,022     $ 150,887     $ 149,844  
                   
Common shares outstanding (in thousands)   7,734       7,640       7,629       7,630       7,634  
Tangible book value per common share $ 22.37     $ 21.89     $ 20.84     $ 19.78     $ 19.63  
                   
Total assets $ 2,515,869     $ 2,543,883     $ 2,506,523     $ 2,572,726     $ 2,442,982  
Less:                  
Goodwill   35,554       35,554       35,554       35,554       35,554  
Mortgage servicing rights, net   5,604       5,051       4,599       4,346       3,361  
Other intangible assets, net   2,528       2,695       2,862       3,028       3,196  
Tangible assets $ 2,472,183     $ 2,500,583     $ 2,463,508     $ 2,529,798     $ 2,400,871  
                   
Tangible common equity to tangible assets   7.00 %     6.69 %     6.46 %     5.96 %     6.24 %
Allowance for Loan Loss as a Percentage of Total Loans, Excluding PPP Loans
  As of
  December 31,   September 30,   June 30,   March 31,   December 31,
(Dollars in thousands, except per share data)   2021       2021       2021       2021       2020  
  (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)    
Total loans $ 1,652,771     $ 1,719,717     $ 1,775,243     $ 1,861,691     $ 1,723,537  
Less:                  
PPP loans   76,505       147,645       259,303       405,770       290,135  
Total loans, excluding PPP loans $ 1,576,266     $ 1,572,072     $ 1,515,940     $ 1,455,921     $ 1,433,402  
                   
Allowance for loan loss $ 21,425     $ 21,731     $ 23,144     $ 22,578     $ 22,297  
Allowance for loan loss as a percentage of total loans   1.30 %     1.26 %     1.30 %     1.21 %     1.29 %
Allowance for loan loss as a percentage of total loans, excluding PPP loans   1.36 %     1.38 %     1.53 %     1.55 %     1.56 %

 


Level One Bancorp Inc